Rotary Engineerin

Rotary Engineerin: Results was hit by an unexpected $46m cost over-run for its SATORP project, resulting in a 90% YoY fall in net profit to $1.0m (2Q11: $10.2m). Its original civil sub-contractors were not being able to cope with the SATORP schedule, leading to additional costs for hiring new subcontractors. Excluding the SATORP cost over-runs, mgt said that its gross margin will still be lower at 15% (2Q11: 21%) due to margin pressure from recent contracts. OCBC maintains Hold with $0.50 TP, noting that the stock is already at depressed valuation (1x P/B, -1 SD below 5-year average).